The decline was led by a retreat in the new orders gauge and a "sharp fall" in the employment sub-index, the newswire reported.

The average reading over the first quarter was 58.4, in comparison with 63.3 for the last three months of 2013.

Nevertheless, "it remained well above the 50 level, though, pointing to continued recovery of the US economy in a quarter that was plagued by bad weather which almost certainly had some negative impact on the results", MNI said.

Underpinning the index was a rise in the barometer for production. A gauge of prices charged by companies declined to its lowest since April 2013.

Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said: "March saw a significant weakening in activity following a five month spell of firm growth. It's too early to tell, though, if this is the start of a sustained slowdown or just a blip."

However, a majority of survey respondents forecast a pick-up in business conditions for over the next three months, MNI added.

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